Who is the Cheap Labor Lobby?

Despite the endless blathering and squirming to the contrary on the part of Wired Magazine, the Wall Street Journal, the Cato Institute and other institutions that normally proclaim the truth of free-market economics, the Law of Supply and Demand applies to labor as much as to any other thing that is bought and sold. That is to say, if one increases the supply of labor relative to demand, its price will fall. That price is your salary, friend. And mass immigration is inexorably driving it down. Well, maybe not your salary personally, if you are lucky enough to work in a sector of the economy that is sheltered, for some reason, from the effects of immigrant labor, as lawyers are by the fact that few immigrants have American law degrees. But it is the salary of your neighbors, and it is being depressed by an influx of cheap labor. There is just no way around this basic economic fact. If there is, then free-market economics is a lie.

Yes, immigrant labor expands the economy as a whole by adding more producing workers. But a big aggregate GNP isn’t prosperity: just compare Switzerland, which is tiny but rich, with India, which is huge but poor. Per capita GNP, which produces per-capita income, is prosperity, and immigration does nothing to increase that. True, it might, if immigrants were on average more productive than native Americans. But they’re not. Every measure – by the Census Bureau and others – shows them as being massively poorer, less educated, and less likely to attain middle-class status than native Americans.

America was founded on the concept – well understood by Alexander Hamilton and the other economic sophisticates among the founders – of a middle-class society, i.e. a society organized to minimize the number of people who constitute cheap labor. Cheap labor was the proletariat which drove Europe’s class-ridden and undemocratic politics, the nightmare of revolution and reaction America was founded to escape.

Contrary to libertarian myth, America’s economy was never, ever, based on a totally free market in labor. It was based on a labor market constricted by limited immigration and a small population relative to national resources, and a free market in everything else. This was designed to produce high wages. We have always been an explicitly high-wage nation relative to other societies, and this did not happen by accident. (This is the key story in Pat Buchanan’s book The Great Betrayal, and he is right about this, even if he is wrong about other things.)

Labor is the one and only area in which no rational society should want to construct a free market, because free markets make things cheap, and high wages equal a high standard of living. Before anyone pounces, I realize you have to define this a real, not nominal, wages and that there are all sorts of technicalities to this issue. But the principle is rock-solid. Labor is fundamentally different from all other commodities because its well-being is an end in itself, not a means to other ends. And before anyone pounces again, I am advocating controls on the influx of foreign labor, not unions or limits on which jobs Americans can hold.

We used to have a commitment to a middle-class, bourgeois society. We have now lost that commitment at the moment when we are busy congratulating ourselves on how supremely capitalist we have become. We are importing a proletariat when we should be abolishing poverty.

Rather than making a profit through superior technology and management, as American business has surpassed the entire world in doing for 200 years, an increasingly large sector of corporate America just wants to take the lazy road of importing cheap labor to work for them. This is not economic progress; it is retrogression. It is a formula for becoming Brazil.

1. The high-tech industry. Microsoft Chairman Bill Gates, the pre-eminent figure in the high tech industry, is a passionate and vociferous supporter of cheap labor, primarily because overseas-trained engineers from India, China and Pakistan are cheaper than American tech workers.

2. The meat packing industry, especially pig and chicken slaughtering. This industry, of course, has a long and storied past of using cheap immigrant labor. Read Upton Sinclair’s novel The Jungle from 100 years ago.

3. Clothing manufacturers. Despite the efforts of the Ladies Garment Workers Union to eliminate sweat shops some 60 years ago, they are still alive and thriving in the states, employing mostly Asian women who work in terrible conditions.

4. Unions. These supposed advocates of the American worker and longtime opponents of importing immigrant labor are now part of the cheap labor lobby because they primarily serve the interests of union bosses, not workers. Bosses want more poor workers so they can have more members. They don’t want to see their members graduate to the middle class, where people generally don’t feel the need to belong to a union.

5. The hotel and restaurant industry. Another big business interest whose employees are primarily cheap labor from Latin America.

6. The ultra-wealthy – both liberals and nominal conservatives. They believe that only foreign workers are willing to work as their nannies, landscapers, and housekeepers. 7. The U.S. Chamber of Commerce, led by Grover Norquist, formerly a vocal spokesman for many conservative issues. This group has led the charge in convincing Congress to expand the awful H-1B visa program. They argue that more H-1B visas granted to foreign workers will alleviate a mythical shortage of skilled technology workers. The H-1B visa program allots 115,000 foreign worker visas annually, but the Chamber of Commerce said that isn’t nearly enough.

8. The governors of certain rural, Midwestern states (such as Iowa) whose populations are shrinking, prompting a cry for an influx of new residents. Of course, these governors do not consider attracting native Americans by offering a growing economy a better solution.

Cheap labor is not real capitalism, it is corporatism, for cheap labor is subsidized by the government, which ends up paying the health and welfare costs of these workers. All taxpayers bear the cost.

Let’s get clear about one thing: there are no jobs that Americans “won’t do.” There are jobs that Americans won’t do at the wage being offered. If you offered me enough money, I would bus tables or clean bathrooms. When I was younger and without work experience, I would have done so gladly. If employers can’t fill these jobs, this is their own fault for not offering enough. They have no intrinsic right to be able to fill positions at the price they feel like paying, any more than you or I have the right to buy a car or a TV at the price we feel like paying. I will concede there is a shortage of labor in this country when the cheap labor lobby concedes there is a shortage of Lear Jets, which I would dearly like to own.

Who’s fighting the cheap labor lobby? For one thing, the 235,000 members of the Institute of Electrical and Electronics Engineers Inc.-USA and the American Engineering Association. Last summer they chastised Congress for facilitating the cheap labor lobby when there were so many unemployed American engineers with training in high-demand skills such as C++ and Java. According to the IEEE-USA, the unemployment rate for electrical and electronics engineers was up to 4.8 percent by last summer, compared to 4.1 percent for the first quarter of the year. In addition, the jobless rate for computer scientists was 5.3 percent, up from 4.8 percent in the first quarter. Among older engineers, who can easily be scrapped for new foreign workers, the rates are much worse.

"It is time for Congress to take a closer look at the problem of engineering unemployment and eliminate the government subsidies and incentives that encourage corporate management to treat US engineers as a disposable labor commodity rather than an essential investment in our nation's future.”

It is not simply laid off workers who see the problem. Norman Matloff, a computer science professor at the University of California at Davis, has studied hiring at high-tech firms. Using hard data, he has concluded that companies overwhelmingly hire cheap foreign labor over American engineers applying for the same jobs. He debunked the myth of a “desperate software labor shortage” when he appeared before Congress several years ago.

One of the cheap labor lobbyist’s most devious tactics is supporting immigrants rights groups. This is a practice favored by Bill Gates, who contributes large amounts to “open borders” and immigrants rights groups.

One irony is that many of the immigrants who are harmful additions to the American economy would actually be beneficial back home, where the level of economic development is much lower. The Indian government isn’t that happy about seeing its best and brightest end up in Silicon Valley. We should sympathize entirely with their desire to have them back home where they can do some good.

But in Iowa last year, that state’s residents risked the retribution of the left by speaking out against a plan by Gov. Tom Vilsack, a Democrat and cheap-labor lobbyist. His “New Iowans” proposal to bring immigrants there to fill jobs caused a swift and strong backlash, with many Iowans complaining that immigrants would take their jobs and drive wages down. Indeed, liberals and the cheap-labor lobby quickly attacked, citing Iowa’s overwhelmingly white population and accusing its citizens of racism and fear-mongering. However, once his constituents voiced their opposition, Vilsack quietly reversed his position on mass immigration to the state, emphasizing instead the part of the plan that encourages former Iowa residents to return to the state.

Ironically, cheap labor will ultimately be the undoing of American unions, one of cheap labor’s newest devotees. In the hotel and restaurant industry, a new set of workers has collectively negotiated lower wages and worse working conditions for its rank and file members, an inevitable consequence of a shift in the supply-demand balance with respect to labor that unionization cannot abolish. The same pressure, more or less intense in some industries, in some regions, and at different points in the economic cycle, is inexorably at work against the rest of the labor force.

Note: My thanks to Diana Hull, of the group Californians for Population Stabilization, which has done extensive research on the detrimental effects of immigration on that state. Also, thanks to David Simcox, chair of the Policy Board of the Center for Immigration Studies, who wrote an excellent article on the subject of labor and the role of unions in The Social Contract.

I'm afraid this is a kind of weaselly argument. First the author complains that poorly educated emigrants are dragging down the per-capita GNP, and impoverishing the nation. Then it turns out that her real beef is with highly educated immigrants who are paid significantly above the national average, and are in fact raising the per-capita GNP.

I personally know many Indian guys who have come here on H1Bs, and then gotten green cards. They are more skilled and better educated than the average American competing with them, and they get higher, not lower, salaries. They also behave properly, save their money, buy houses, and generally act like good citizens. I would think we could use more immigrants like this, and less of the other kind.

If American workers can't compete with them, perhaps we will have to reform schools so that they actually provide a solid education for our children. Either that, or we could send the educators we've got to India as a form of sabotage.

Labor is the one and only area in which no rational society should want to construct a free market, because free markets make things cheap, and high wages equal a high standard of living. Before anyone pounces, I realize you have to define this a real, not nominal, wages and that there are all sorts of technicalities to this issue. But the principle is rock-solid. Labor is fundamentally different from all other commodities because its well-being is an end in itself, not a means to other ends.

Free Market Fundamentalism bump.

Then it turns out that her real beef is with highly educated immigrants who are paid significantly above the national average, and are in fact raising the per-capita GNP.

It seems to me she addresses both ends of the economic scale logically and carefully. I know many immigrants, legal and illegal, who are fine people. That doesn't alter their impact on the law of supply and demand...and salaries.

If American workers can't compete with them, perhaps we will have to reform schools so that they actually provide a solid education for our children. Either that, or we could send the educators we've got to India as a form of sabotage.

For retraining you mean? So are you saying that American schools should be patterned on Red China? Well, at least it will mean free tuition and less financial risk for chosing engineering or science over law.

Then it turns out that her real beef is with highly educated immigrants who are paid significantly above the national average, and are in fact raising the per-capita GNP.

No, even they pull down the salaries of equally skilled Americans, resulting in a net decline of the overall average.

Not being a writer I've been trying to find the words to say this:

Rather than making a profit through superior technology and management, as American business has surpassed the entire world in doing for 200 years, an increasingly large sector of corporate America just wants to take the lazy road of importing cheap labor to work for them. This is not economic progress; it is retrogression.

The same could be said for those corporations who cooked their books, gave false reports or the energy (power/nat.gas) companies who tried every way they could to price gouge or use trickery to manipulate the market rather than earn an honest profit from their commodity.

H1B bashing is popular with a few fellow Freppers. I happen to think their energy is misdirected, but it is a free country.

This is a zero-sum argument, Willie.

Let's suppose an American could do a job. He works at that job, producing 100 units of output. An Indian guy comes along, and takes over this job, and does a better job, producing 120 units of output. He does such a good job, in fact, that he gets a raise. The American is forced to take a job at a lower salary, but since he is better qualified to do it, he still produces 100 units of output.

Well, what has really happened? The economy is better off, because now we have 220 units of total output instead of 100. The American has a lower salary, but the Indian has raised the salary for his job, producing on average two jobs with the same salary as before, both significantly above the average. This should raise, not lower, the average salaries in the whole country.

The real problem with this is the guy at the bottom, who can't go any lower in job or salary. He's the one who has to compete with the unskilled immigrants. This is why we would be better off if we stopped the immigration of the unskilled, and encouraged immigration by the highly skilled.

This is a zero-sum argument, Willie.

No it's not. Nor does it make the absurd counterassumption of perpetual growth as you propose. The economy is capable of both expansion AND contraction. And oversupply of labor causes wages and compensation to decrease, period.

Thanks for posting this. It's very much worth reading. Though it's certainly debatable whether importing and exploiting cheap labor is capitalism or just a deformation or abuse of it. It's not the only or inevitable form of a free enterprise, private property economy. It's not essential to the functioning of market economies, but one can't assume that everything about capitalism or the profit motive is going to be or look good.

You never would have seen this on David Horowitz's radar a few years back

I'm not so certain of that. If he has truly accepted the concepts of a strong middle class and free market economics, it's hard to see how this conclusion could be avoided. Maybe he had more important things on his radar back then.

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